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a)The cash balance on December 1 is $50,600
a)The cash balance on December 1 is $50,600. b. Actual sales for October and November and expected sales for December are as follows:
Cash sales Sales on account
October November December $ 74,400 $ 86,000 $ 85,000 $ 515,000 $ 533,000 $ 672,000
You have been asked to prepare a December cash budget for Ashton Company, a distributor of exercise equipment. The following information is available about the company's operations:
1
Sales on account are collected over a three-month period as follows: 20% collected in the month of sale, 60% collected in the month following sale, and 18% collected in the second month following sale. The remaining 2% is uncollectible.
c. Purchases of inventory will total $317,000 for December. Thirty percent of a month's inventory purchases are paid during the month of purchase. The accounts payable remaining from November's inventory purchases total $190,000, all of which will be paid in December. d. Selling and administrative expenses are budgeted at $526,000 for December. Of this amount, $58,600 is for depreciation. e. A new web server for the Marketing Department costing $78,000 will be purchased for cash during December, and dividends totaling $15,500 will be paid during the month. f. The company maintains a minimum cash balance of $20,000. An open line of credit is available from the company's bank to increase its cash balance as needed.
Required: 1. Calculate the expected cash collections for December. 2. Calculate the expected cash disbursements for merchandise purchases for December. 3. Prepare a cash budget for December. Indicate in the financing section any borrowing that will be needed during the month. Assume that any interest will not be paid until the following month.
Complete this question by entering your answers in the tabs below.
I
Red 1 and 2
Red 3
1. Calculate the expected cash collections for December. 2. Calculate the expected cash disbursements for merchandise purchases for December.
Total cash collections
Cash disbursements for merchandise purchases
Expert Solution
| Ashton Company | ||
| Schedule of Expected Cash Collections | ||
| Amount $ | ||
| December Cash Sales | $85,000.00 | |
| Collection on account | ||
| October sales | 515000*18% | $92,700.00 |
| November sales | 533000*60% | $319,800.00 |
| December Sales | 672000*20% | $134,400.00 |
| Total Cash Collection | $631,900.00 | |
| Ashton Company | ||
| Schedule of Expected Cash Disbursement | ||
| Amount $ | ||
| Payment to Suppliers: | ||
| November Purchase | $190,000.00 | |
| December Purchase | 317000*30% | $95,100.00 |
| Total Cash Payments | $285,100.00 | |
| Ashton Company | ||
| Cash Budget | ||
| For the month of December | ||
| Amount $ | ||
| Beginning Cash Balance | 50600 | |
| Add Collection from Customers | $631,900.00 | |
| Total Cash Available | $682,500.00 | |
| Less Cash Disbursement | ||
| Payment to suppliers for Inventory | $285,100.00 | |
| Selling and administrative expenses ($526,000-$58,600) | 467400 | |
| New web server | 78000 | |
| Dividend paid | 15500 | |
| Total Cash Disbursement | ($846,000.00) | |
| Excess/(Deficiency) of cash available over disbursments | ($163,500.00) | |
| Financing: | ||
| Borrowing | =20000+163500 | $183,500.00 |
| Repayments | $ - | |
| Interest | Interest to be paid in following month | $ - |
| Total Financing | $183,500.00 | |
| Ending Cash balance | 20000 |
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